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The Guardian: Davis exit likely to cost Sainsbury’s £4m

The Guardian: Davis exit likely to cost Sainsbury’s £4m

“He joins the growing list of chief executives such as Sir Philip Watts of Shell who have left companies with large pay-offs in spite of poor performance, sparking shareholder protests.”

Ashley Seager

Monday September 13, 2004

Sainsbury’s is thought to be close to settling a dispute with former chief executive Sir Peter Davis that could see him pocket nearly £4m in spite of presiding over a slump in the supermarket group’s sales, market share and profits.

Sir Peter was ousted in July after spending £3bn upgrading the group’s stores and distribution system to little apparent effect. Shareholders were outraged at the severance package he had negotiated.

Lawyers for both sides have been locked in talks for two months, with Sainsbury’s attempting to negotiate down the size of a package which includes 864,000 bonus shares awarded for 2003-04, a year’s pay of £500,000 and up to half a million bonus shares and options for the 2004-05 financial year.

Shareholders were furious at the company’s annual meeting in July that the 864,000 shares – 86% of those available for good performance and worth £2.4m at today’s share price – were to be handed over in spite of the firm’s poor performance.

The group’s non-executives had approved the package in 2003, however, and although they withdrew it in early July, there appears to be no way out. A spokeswoman said talks were still going on but lawyers have reportedly said the company’s legal case is weak and it is likely to have to stump up the cash and the shares. The company is thought to be keen to draw a line under the embarrassment.

Sir Peter, former chief of insurer Prudential and publisher Reed Elsevier, joined the supermarket group in 2000 as chief executive, becoming chairman this year.

He joins the growing list of chief executives such as Sir Philip Watts of Shell who have left companies with large pay-offs in spite of poor performance, sparking shareholder protests.

Sainsbury’s new chief executive, Justin King, was reported yesterday to be planning to abandon the group’s foray into homewares and concentrate on its grocery business. It is also the subject of takeover speculation, with analysts naming Argos owner GUS and American retailer Target among potential candidates. The rumours pushed its share price up to 283p last week.

http://www.guardian.co.uk/business/story/0,,1303071,00.html

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